Determining the nexus between financial inclusion and economic development in Pakistan

Abstract

Purpose

This paper aims to evaluate the relationship between financial inclusion and economic development in Pakistan based on available sources of detailed data and assess its outcome of financial inclusion on basic standards of life, then accord relevant recommendations to prompt economic growth and development.

Design/methodology/approach

The research design selected for data analysis was meta-analysis, besides, data analysis over the period 2010-2015 was performed by using a descriptive statistical approach, regression and correlation analysis, i.e. the Pearson correlation matrix.

Findings

The authors find a positive relationship between financial inclusion and economic development, resultantly; increase in financial inclusion may lead to an increase in economic development. In detail, the number of the number of bank accounts (per 1,000 adult population) and the number of bank branches (per 100,000 people) have a positive relationship with human development index (HDI). Where else the amount of automated teller machines per 1,000 km² (per cent) reveals a negative relationship.

Practical implications

The study has shown that expand financial access such as strengthen the establishment of bank accounts and bank branches can increase economic development in Pakistan. That is the government should focus on the financial inclusion policies as a means of ameliorating poverty, through a participation of all economic agents in the financial system. There is an utmost need for the Government of Pakistan to prioritize the importance of financial inclusion.

Originality/value

The novelty of the study is taken HDI and three representative indicators as a measurement of economic growth and financial inclusion, respectively, meanwhile, meta-analysis, multivariate regression model sum up that poverty alleviation is connected with the development of a more inclusive financial services sectors.

Citation

Raza, M.S., Tang, J., Rubab, S. and Wen, X. (2019), "Determining the nexus between financial inclusion and economic development in Pakistan", Journal of Money Laundering Control, Vol. 22 No. 2, pp. 195-209. https://doi.org/10.1108/JMLC-12-2017-0068